Tom Moeller

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060330a.jpg" width="353">
US real growth last quarter was revised up slightly, as expected, to 1.7% (AR) from the preliminary estimate of 1.6% and from 1.1% growth estimated two months ago. This quarter, growth is widely expected to bounce back with several forecasts calling for a 5% advance.
Reported today for the first time, the estimate of 4Q corporate profitability surged. A 14.4% (21.3% y/y) jump was the strongest for any quarter since 4Q 1992 and was driven by a 37.6% (12.3% y/y) surge in financial sector earnings. They recovered after the losses suffered due to payments in the wake of three hurricanes during 3Q. Domestic nonfinancial profits snapped back 12.1% (26.8% y/y) from the 1.1% loss during 3Q while profit margins surged. Foreign sector profitability fell 6.5% (+16.8% y/y).
After tax profits (w/CCA and IVA) increased 13.8% (14.6% y/y) as taxes rose 15.8% (42.4% y/y). After tax profits without adjustment grew 11.7% (38.7% y/y) while the inventory valuation and capital consumption adjustments roughly offset one another. Corporate net cash flow grew a strong 4.1% (18.5% y/y).<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060330b.jpg" width="353">
Domestic demand was reduced during 4Q as personal consumption of motor vehicles &amp; parts slumped 2.9% (-10.6% y/y). Lower auto consumption reduced real GDP growth by 1.9 percentage points but the GDP subtraction from lower auto output was limited to 0.6 percentage points as inventories built up. Overall, real PCE grew just 0.9% at an annual rate (2.9% y/y) during 4Q05, the slowest quarterly rate of growth in over ten years.
Defense spending is now estimated to have fallen 2.3% (+1.7% y/y) and that decline subtracted 0.4% percentage points from 4Q GDP growth.
The drag on GDP growth from a wider foreign trade deficit ballooned to 1.4 percentage points as imports grew 12.1% (AR, 5.3% y/y) while exports rose 5.0% (6.4% y/y).
Countering the drag from foreign trade, inventories contributed 1.9 percentage points to GDP growth after more than a year of little or no positive contribution.
The chain price index grew 3.5%, an upward revision from the early estimate of a 3.0% rise. The upside surprise during 4Q was that the price index for private fixed investment grew 5.4% (AR, 3.7% y/y), inflated by an 8.3% (5.2% y/y) jump in residential and a 3.8% (2.8% y/y) rise in nonresidential fixed investment.

<table border="0" cellspacing="0" width="100%">
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<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@E7/@E701/@E701.HTM">Chained 2000$, % AR</a></th>
<th scope="col">4Q &#39;05 (Final)</th>
<th scope="col">3Q &#39;05</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">GDP</td>
<td>1.7%</td>
<td>4.1%</td>
<td>3.2%</td>
<td>3.5%</td>
<td>4.2%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Inventory Effect</td>
<td>1.9%</td>
<td>-0.4%</td>
<td>-0.1%</td>
<td>-0.3%</td>
<td>0.3%</td>
<td>0.0%</td>
</tr>
<tr class="odd">
<td class="firstcol">Final Sales</td>
<td>-0.2%</td>
<td>4.6%</td>
<td>3.3%</td>
<td>3.8%</td>
<td>3.9%</td>
<td>2.7%</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Foreign Trade Effect</td>
<td>-1.4%</td>
<td>-0.1%</td>
<td>0.0%</td>
<td>-0.1%</td>
<td>-0.5%</td>
<td>-0.3%</td>
</tr>
<tr class="odd">
<td class="firstcol">Domestic Final Demand</td>
<td>1.1%</td>
<td>4.5%</td>
<td>3.3%</td>
<td>3.9%</td>
<td>4.4%</td>
<td>3.0%</td>
</tr>
<tr>
<td class="firstcol">Chained GDP Price Index</td>
<td>3.5%</td>
<td>3.3%</td>
<td>3.1%</td>
<td>2.8%</td>
<td>2.6%</td>
<td>2.0%</td>
</tr>
</tbody>
</table>
Initial Jobless Insurance Claims Drop 
by <a href="/comment/Moeller.html">Tom Moeller</a> March 30, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060330c.jpg" width="353">
Last week, initial claims for unemployment insurance fell 10,000 to 302,000 from an upwardly revised level the prior period. The figure matched Consensus expectations.
Revisions raised the recent claims figures by roughly 10,000.
During the last ten years there has been a (negative) 75% correlation between the level of initial jobless insurance claims and the m/m change in payroll employment.
The four-week moving average of initial claims fell to 310,750 (-7.7% y/y).
Continuing unemployment insurance claims reversed most of the prior week&#39;s sharp drop, which was revised deeper, and rose 38,000 to 2.472M.
The insured rate of unemployment was stable at 1.9% for the sixth week.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/WEEKLY/@W5/@W507/@W507.HTM">Unemployment Insurance (000s)</a></th>
<th scope="col">03/25/06</th>
<th scope="col">03/18/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Initial Claims</td>
<td>302</td>
<td>312</td>
<td>-14.2%</td>
<td>332</td>
<td>343</td>
<td>402</td>
</tr>
<tr>
<td class="firstcol">Continuing Claims</td>
<td>--</td>
<td>2,483</td>
<td>-4.4%</td>
<td>2,663</td>
<td>2,924</td>
<td>3,532</td>
</tr>
</tbody>
</table>
French Consumers Look for Higher Unemployment; German Jobs and Unemployment Little Changed in Latest Labor Data 
by <a href="/comment/Stone.html">Carol Stone</a> March 30, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060330d.jpg" width="353">
Labor policies are at the fore currently in France and Germany. France, as it tries to modify its basic &quot;lifetime employment&quot; work arrangements, faces massive riots by people at the other end of the economic spectrum -- who basically benefit from this policy -- from the young people who rioted last autumn because, due to this policy, they can&#39;t get a foot in the employment door. The government&#39;s proposal for a probationary employment period for young workers may sound good to these latter people, but it is not at all popular with current workers.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060330e.jpg" width="353">
So today, the French statistics agency, INSEE, published the March household confidence survey. Does it show a reaction to these developments? Mildly so, and very specifically. The overall sentiment measure fell 2 points to -26 in March from -24 last month. These are both better than the November survey, in the midst of the labor disturbances; that figure was -33, down 3 points from October and the worst reading of the year, which averaged -28. So the current readings look &quot;good&quot; by comparison.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060330f.jpg" width="353">
Two components showed some impact that may be related to these current disputes. Expectations about living standards fell 5 points this month to -38. In November, as well, this measure fell noticeably, to -43 from -37 in October. Expectations about unemployment also worsened each time: the new reading is +41 (meaning that 41% more people believe unemployment will increase than believe it will decrease), up sharply from February&#39;s +12. In November, by contrast, expectations about unemployment did not change from October&#39;s +20 value. Apparently, people see some fall-out from the government&#39;s current &quot;probation&quot; proposal, while they saw no implications from the November demonstrations.
In Germany, the February labor force survey (LFS) was reported today, along with &quot;registered&quot; unemployment for March. In the LFS, employment remained stagnant, increasing a mere 5,000 from January&#39;s level; since mid-2003, the number of people employed has hovered in a narrow range around 38.6 million. Despite the flatness in the number of workers, unemployment rates have generally drifted lower. The rate according to the ILO definition, which is similar to that used in the United States, was 8.6% in February, down from 8.7% in January and from several months a year ago that were at or near 9.5%. The ILO definition is standard to all the Euro-Zone countries. The more widely watched local German measure, &quot;registered&quot; unemployment is also below year-ago levels, although it ticked up to 11.4% in the March report; its recent low was 11.2% in December. Government and private commentators attributed the March increase to cold weather, which has limited seasonal hiring for outdoor work. They anticipate a rapid rise in hiring as temperatures rise.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060330g.jpg" width="353">
The combination of stagnant employment conditions and downtrends in unemployment rates is clarified through developments in the labor force as a whole. As seen in the accompanying graph, it is declining, and is down by about 1 million workers since late 2004. This allows reported unemployment to go down, even if employment is not going up.
Germany too wants to liberalize its labor laws, and its leaders are sensitive to the violent situation in France. While German business confidence rose sharply this month, as documented here earlier in the week by Louise Curley, its political leaders are waffling in the face of the dilemma the strong reaction causes them. Each of the accompanying economic reports thus takes on greater weight in view of the high political stakes.

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<th scope="col" class="firstcol">&nbsp;</th>
<th scope="col">Mar 2006</th>
<th scope="col">Feb 2006</th>
<th scope="col">Jan 2006</th>
<th scope="col">Year Ago</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">France: Overall Household Confidence (%)</td>
<td>-26</td>
<td>-24</td>
<td>-27</td>
<td>-25</td>
<td>-28</td>
<td>-22</td>
<td>-27</td>
</tr>
<tr>
<td class="firstcol">Living Standard, Next 12 Mos. (%)</td>
<td>-38</td>
<td>-33</td>
<td>-37</td>
<td>-34</td>
<td>-37</td>
<td>-27</td>
<td>-38</td>
</tr>
<tr class="odd">
<td class="firstcol">Unemployment, Next 12 Mos. (%)</td>
<td>+41</td>
<td>+12</td>
<td>+15</td>
<td>+57</td>
<td>+39</td>
<td>+49</td>
<td>+68</td>
</tr>
<tr>
<td class="firstcol">Germany LFS</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Employment (Mil.)</td>
<td>&nbsp;</td>
<td>38.604</td>
<td>38.599</td>
<td>38.719</td>
<td>38.668</td>
<td>38.779</td>
<td>38.631</td>
</tr>
<tr>
<td class="firstcol">Unemployment Rate (ILO) (%)</td>
<td>&nbsp;</td>
<td>8.6</td>
<td>8.7</td>
<td>9.5</td>
<td>9.1</td>
<td>9.2</td>
<td>8.8</td>
</tr>
<tr class="odd">
<td class="firstcol">&quot;Registered&quot; Unemployment (%)</td>
<td>11.4</td>
<td>11.3</td>
<td>11.3</td>
<td>12.1</td>
<td>11.7</td>
<td>10.5</td>
<td>10.5</td>
</tr>
</tbody>
</table>


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US real growth last quarter was revised up slightly, as expected, to 1.7% (AR) from the preliminary estimate of 1.6% and from 1.1% growth estimated two months ago. This quarter, growth is widely expected to bounce back with several [...]

US 4Q GDP Little Revised at 1.7%, Profits Surged

Carol Stone, CBE

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060329b.jpg" width="353">
British retailers face disappointing sales this month, according to today&#39;s release of the monthly CBI (Confederation of British Industry) Distributive Trades Survey. A month ago, a net of just 5% of respondents said they looked for March sales to weaken from a year earlier. Instead, a net of 16% saw sales fall. This was a second consecutive actual result that came in far below survey participants&#39; expectations. In February, a slim majority of 1% expected sales to rise, but the actual balance was significantly different, at -18%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060329c.jpg" width="353">
In the motor trades, March results were also far below survey participants&#39; plans. After a difficult year in 2005, many dealers expected sales to recover, so that in January, only a net balance of 7% expected further declines in sales. But sales came in lower, on balance, at 34%. Some recovery did take place in February, when a net of 5% of dealers saw rising sales, albeit over a weak year-ago base. However, this improvement did not last. Dealers looked for continuing modest gains in March to a +7% reading, but sales fell on balance at 18% of outlets.
Retailers have cut orders from their suppliers; after a brief period of less negative readings, a full 25% of firms, on net, reduced order volume in March, following -12% in January and -17% in February. In the motor trades, the number of firms raising or reducing orders is just about even, but this follows a decline at 44% of firms overall for last year, with weakness as deep as -67% in October.
We have cited here the weakening labor markets in the UK, most recently on March 15. Apparently, while disappointing, it should be no wonder that retail sales are feeling the effects.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/UK/@U9/@U9.HTM">United Kingdom</a></th>
<th scope="col">Apr 2006</th>
<th scope="col">Mar 2006</th>
<th scope="col">Feb 2006</th>
<th scope="col">Jan 2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Retail Sales: Expected</td>
<td>-7</td>
<td>-5</td>
<td>+1</td>
<td>-9</td>
<td>-7</td>
<td>+25</td>
<td>+18</td>
</tr>
<tr>
<td class="firstcol">Reported</td>
<td>--</td>
<td>-16</td>
<td>-18</td>
<td>-11</td>
<td>-14</td>
<td>+24</td>
<td>+14</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Trades: Expected</td>
<td>-30</td>
<td>+7</td>
<td>+10</td>
<td>-34</td>
<td>-36</td>
<td>-8</td>
<td>-18</td>
</tr>
<tr>
<td class="firstcol">Reported</td>
<td>--</td>
<td>-18</td>
<td>+5</td>
<td>-7</td>
<td>-39</td>
<td>-8</td>
<td>-19</td>
</tr>
</tbody>
</table>
</body>
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British retailers face disappointing sales this month, according to today's release of the monthly CBI (Confederation of British Industry) Distributive Trades Survey. A month ago, a net of just 5% of respondents said they looked for [...]

Retail Sales Lag Shops' Plans in March, New CBI Distributive Trades Survey Shows

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060329a.jpg" width="353">
Last week, the total number of mortgage applications recovered 1.2% following two weeks of decline. Nevertheless, applications in March are 2.4% below the February average which fell 6.3% m/m.
Purchase applications recovered all of the prior week&#39;s decline with a 2.7% rise but the average level during March remained down 1.6% from the February average.
During the last ten years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance fell for the third straight week, off 1.0% w/w and the March level is 3.1% below the February average which fell 2.0% from January.
The effective interest rate on a conventional 30-year mortgage rose two basis points to 6.56% and the rate on 15-year financing ticked up to 6.28%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities and during the last ten years there has been a (negative) 82% correlation between purchase applications and the effective rate on a 30-Year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
Money and Modern Banking without Bank Runs from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr242.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
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<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">03/24/06</th>
<th scope="col">03/17/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>571.7</td>
<td>565.0</td>
<td>-15.2%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>404.1</td>
<td>393.6</td>
<td>-14.2%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,558.4</td>
<td>1,574.5</td>
<td>-16.1%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
</body>
</html>

Last week, the total number of mortgage applications recovered 1.2% following two weeks of decline. Nevertheless, applications in March are 2.4% below the February average which fell 6.3% m/m. Purchase applications recovered all of [...]

Mortgage Applications Recover Some

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060322b.jpg" width="353">
Last week, the total number of mortgage applications recovered 1.2% following two weeks of decline. Nevertheless, applications in March are 2.4% below the February average which fell 6.3% m/m.
Purchase applications recovered all of the prior week&#39;s decline with a 2.7% rise but the average level during March remained down 1.6% from the February average.
During the last ten years there has been a 54% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.
Applications to refinance fell for the third straight week, off 1.0% w/w and the March level is 3.1% below the February average which fell 2.0% from January.
The effective interest rate on a conventional 30-year mortgage rose two basis points to 6.56% and the rate on 15-year financing ticked up to 6.28%. Interest rates on 15 and 30 year mortgages are closely correlated (&gt;90%) with the rate on 10 year Treasury securities and during the last ten years there has been a (negative) 82% correlation between purchase applications and the effective rate on a 30-Year mortgage.
The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site <a href="http://www.mbaa.org">here</a>.
Money and Modern Banking without Bank Runs from the Federal Reserve Bank of New York is available <a href="http://www.newyorkfed.org/research/staff_reports/sr242.pdf"> here</a>.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM">MBA Mortgage Applications (3/16/90=100)</a></th>
<th scope="col">03/24/06</th>
<th scope="col">03/17/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>571.7</td>
<td>565.0</td>
<td>-15.2%</td>
<td>708.6</td>
<td>735.1</td>
<td>1,067.9</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Purchase</td>
<td>404.1</td>
<td>393.6</td>
<td>-14.2%</td>
<td>470.9</td>
<td>454.5</td>
<td>395.1</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Refinancing</td>
<td>1,558.4</td>
<td>1,574.5</td>
<td>-16.1%</td>
<td>2,092.3</td>
<td>2,366.8</td>
<td>4,981.8</td>
</tr>
</tbody>
</table>
Retail Sales Lag Shops' Plans in March, New CBI Distributive Trades Survey Shows 
by <a href="/comment/Stone.html">Carol Stone</a> March 29, 2006


<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060329b.jpg" width="353">
British retailers face disappointing sales this month, according to today&#39;s release of the monthly CBI (Confederation of British Industry) Distributive Trades Survey. A month ago, a net of just 5% of respondents said they looked for March sales to weaken from a year earlier. Instead, a net of 16% saw sales fall. This was a second consecutive actual result that came in far below survey participants&#39; expectations. In February, a slim majority of 1% expected sales to rise, but the actual balance was significantly different, at -18%.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060329c.jpg" width="353">
In the motor trades, March results were also far below survey participants&#39; plans. After a difficult year in 2005, many dealers expected sales to recover, so that in January, only a net balance of 7% expected further declines in sales. But sales came in lower, on balance, at 34%. Some recovery did take place in February, when a net of 5% of dealers saw rising sales, albeit over a weak year-ago base. However, this improvement did not last. Dealers looked for continuing modest gains in March to a +7% reading, but sales fell on balance at 18% of outlets.
Retailers have cut orders from their suppliers; after a brief period of less negative readings, a full 25% of firms, on net, reduced order volume in March, following -12% in January and -17% in February. In the motor trades, the number of firms raising or reducing orders is just about even, but this follows a decline at 44% of firms overall for last year, with weakness as deep as -67% in October.
We have cited here the weakening labor markets in the UK, most recently on March 15. Apparently, while disappointing, it should be no wonder that retail sales are feeling the effects.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/UK/@U9/@U9.HTM">United Kingdom</a></th>
<th scope="col">Apr 2006</th>
<th scope="col">Mar 2006</th>
<th scope="col">Feb 2006</th>
<th scope="col">Jan 2006</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Retail Sales: Expected</td>
<td>-7</td>
<td>-5</td>
<td>+1</td>
<td>-9</td>
<td>-7</td>
<td>+25</td>
<td>+18</td>
</tr>
<tr>
<td class="firstcol">Reported</td>
<td>--</td>
<td>-16</td>
<td>-18</td>
<td>-11</td>
<td>-14</td>
<td>+24</td>
<td>+14</td>
</tr>
<tr class="odd">
<td class="firstcol">Motor Trades: Expected</td>
<td>-30</td>
<td>+7</td>
<td>+10</td>
<td>-34</td>
<td>-36</td>
<td>-8</td>
<td>-18</td>
</tr>
<tr>
<td class="firstcol">Reported</td>
<td>--</td>
<td>-18</td>
<td>+5</td>
<td>-7</td>
<td>-39</td>
<td>-8</td>
<td>-19</td>
</tr>
</tbody>
</table>
</body>
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Louise Curley

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060328c.jpg" width="353">
March surveys indicate that business confidence is surprisingly strong in Germany and Italy, but subdued in France. The first chart shows the IFO business climate index for Germany and the ISAE business confidence indicator for Italy. The second chart shows the percent balance between those in the manufacturing industry, who believe conditions are improving and those who believe they are worsening for Germany and France.<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060328e.jpg" width="353">
Protests over a new law that makes it easier to fire young workers may have dampened French business confidence--it has shown little improvement since October of last year. However, in Germany, a strike by municipal workers against a proposal to increase the work week to 40 hours from 38.5 hours with no increase in pay has been in progress since February 6, with little or no effect on confidence.<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060328d.jpg" width="353">
On the contrary, Germany&#39;s IFO Business Climate Index (2000=100) rose 1.9% in March surprising most observers. The consensus had been for a slight decline. The index is now at 105.4, its highest level since April, 1991. The Business Situation or Current Conditions Index at 105.1 is also at a level last reached in November, 1991 and the Expectations Index is at its highest level since October 94. The third chart shows the history of the Business Situation and Expectations Indexes since their inception in January, 1991.
Although Italy&#39;s ISAE measure of business confidence rose in March--1.6%--to reach 94.2 (2000=100), the highest level since January, 2000, the level of confidence remains almost 6% below that of 2000 while the level in Germany is now some 5% above the 2000 average level. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">Business Confidence</th>
<th scope="col">Mar 06</th>
<th scope="col">Feb 05</th>
<th scope="col">Mar 05</th>
<th scope="col">M/M % or Pct chg</th>
<th scope="col">Y/Y % or Pct chg</th>
<th scope="col">2005&nbsp; </th>
<th scope="col">2004&nbsp;</th>
<th scope="col">2003&nbsp;&nbsp;</th>
</tr>
</thead>
<tbody>
<tr class="odd">
<td class="firstcol">Germany:&nbsp; IFO&nbsp; (2000=100)</td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td class="firstcol">&nbsp; Business Climate</td>
<td>105.4</td>
<td>103.3</td>
<td>93.9</td>
<td>1.93</td>
<td>12.37</td>
<td>95.5</td>
<td>95.4</td>
<td>91.3</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp; Current Situation</td>
<td>105.1</td>
<td>101.9</td>
<td>92.3</td>
<td>3.14</td>
<td>13.87</td>
<td>94.7</td>
<td>93.1</td>
<td>88.1</td>
</tr>
<tr>
<td class="firstcol">&nbsp; Expectations</td>
<td>105.7</td>
<td>104.9</td>
<td>95.2</td>
<td>0.76</td>
<td>11.03</td>
<td>96.3</td>
<td>97.8</td>
<td>95.6</td>
</tr>
<tr class="odd">
<td class="firstcol">Italy: ISAE&nbsp;(2000=100)</td>
<td>94.2</td>
<td>92.7</td>
<td>84.9</td>
<td>1.62</td>
<td>10.95</td>
<td>87.5</td>
<td>89.5</td>
<td>88.0</td>
</tr>
<tr>
<td class="firstcol">France: General Outlook Manufacturing % Balance</td>
<td>&nbsp;-2.0</td>
<td>-2.0&nbsp;</td>
<td>-5.0&nbsp;</td>
<td>0.0&nbsp;</td>
<td>3.0&nbsp;</td>
<td>-12&nbsp;</td>
<td>5&nbsp;</td>
<td>-29&nbsp;</td>
</tr>
<tr class="odd">
<td class="firstcol">Germany: Business Climate in Mfg % Balance</td>
<td>19.2</td>
<td>14.9</td>
<td>-1.5</td>
<td>4.3</td>
<td>20.7</td>
<td>1.1</td>
<td>4.4</td>
<td>-8.0</td>
</tr>
</tbody>
</table>
</body>
</html>

March surveys indicate that business confidence is surprisingly strong in Germany and Italy, but subdued in France. The first chart shows the IFO business climate index for Germany and the ISAE business confidence indicator for Italy. [...]

Business Confidence Improves in Germany and Italy; Is Unchanged in France

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060328h.jpg" width="353">
The Federal Open Market Committee increased the target interest rate for Federal funds 25 basis points to 4.75% at today&#39;s meeting. It was the fifteenth increase since June of 2004 and the unanimous decision was widely expected by analysts.
The discount rate also was raised 25 basis points to 5.75%.
Reflecting little worry about the economic expansion, the Fed statement indicated &quot;The slowing of the growth of real GDP in the fourth quarter of 2005 seems largely to have reflected temporary or special factors.&quot;<img align="right" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060328g.jpg" width="353">
Future rate increases were suggested by the FOMC statement. &quot;The Committee judges that some further policy firming may be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance.&quot;
For the complete text of the Fed&#39;s latest press release please click <a href="http://www.federalreserve.gov/BoardDocs/press/monetary/2006/20060328/default.htm">here</a>.
Goodbye to M3 from the Federal Reserve Bank of St. Louis can be found <a href="http://research.stlouisfed.org/publications/mt/20060401/cover.pdf"> here</a>.
What is Tight Money? from the American Enterprise Institute is available <a href="http://www.aei.org/publications/pubID.24126,filter.all/pub_detail.asp"> here</a>.

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The Federal Open Market Committee increased the target interest rate for Federal funds 25 basis points to 4.75% at today's meeting. It was the fifteenth increase since June of 2004 and the unanimous decision was widely expected by [...]

FOMC Increased Fed Funds Rate to 4.75%

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060328a.jpg" width="353">
Chain store sales slid 1.6% last week, according to the International Council of Shopping Centers (ICSC)-UBS survey.The w/w drop followed a 0.1% decline during the prior period and rounded a lackluster March when sales ended the month about 1.4% lower than at the start. 
The average level of sales in March nevertheless rose roughly 1.0% versus the prior month due to a strong gain at the end of February.
During the last ten years there has been a 47% correlation between the y/y change in chain store sales and the change in nonauto retail sales less gasoline.
The leading indicator of chain store sales ticked up 0.2% after the prior week&#39;s 0.3% decline and in March is up 0.1% versus February.
The ICSC-UBS retail chain-store sales index is constructed using the same-store sales (stores open for one year) reported by 78 stores of seven retailers: Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart.
Higher gasoline prices during March certainly did little to aid chain stores. Last week, the average retail price for regular gasoline held steady w/w at $2.50 per gallon (+16.0% y/y) but that followed a fourteen cent w/w jump the prior period and a fifteen cent rise in the monthly average versus February. During March, gasoline prices were at their highest since last October.
In spot market trading, yesterday&#39;s price for regular unleaded gasoline of $1.82 per gallon was up four cents from last week&#39;s average. U.S. demand for gasoline rose 1.2% from the February average (+0.3% y/y) during the latest four weeks though the very latest figures showed a decline w/w.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM">ICSC-UBS (SA, 1977=100)</a></th>
<th scope="col">03/25/06</th>
<th scope="col">03/18/06</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>462.4</td>
<td>470.0</td>
<td>2.7%</td>
<td>3.6%</td>
<td>4.7%</td>
<td>2.9%</td>
</tr>
</tbody>
</table>


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Chain store sales slid 1.6% last week, according to the International Council of Shopping Centers (ICSC)-UBS survey.The w/w drop followed a 0.1% decline during the prior period and rounded a lackluster March when sales ended the month [...]

Chain Store Sales Slide, Gasoline Prices Up

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<img align="left" border="0" height="265" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/060328b.jpg" width="353">
The Conference Board&#39;s Index of Consumer Confidence jumped 4.4% during March to 107.2, the highest level in nearly four years. The jump compared to Consensus expectations for stability at 102.0 and the m/m stability in the University of Michigan&#39;s March Index of Consumer Sentiment.
During the last twenty years there has been a 52% correlation between the level of consumer confidence and the y/y change in real consumer spending. The correlation rose to 66% during the last ten years.
The index of consumers&#39; expectations recovered most of the prior month&#39;s decline with a sharp 6.8% (-4.1% y/y) gain. Expectations for business conditions improved for the first month in four and more jobs were expected for the first month in three. Expectations for stock prices surged.
Consumers&#39; assessment of the present situation rose for the fifth straight month. The 2.3% increase (13.9% y/y) was driven by a rise in the percentage of respondents who viewed jobs as plentiful to 28.4%, the highest since 2001. Business conditions were thought to be good by 28.3% of respondents, the highest since last July.
Price inflation expected in twelve months fell to 4.8%, down slightly from the 5.2% expected in December and down sharply from the 6.8% expected last September.
The Conference Board&#146;s survey isconducted by a mailed questionnaire to 5,000 households and about 3,500 typically respond.

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/USECON/@EF/@EF14/@EF1401/@EF1401.HTM">Conference Board</a></th>
<th scope="col">Mar</th>
<th scope="col">Feb</th>
<th scope="col">Y/Y</th>
<th scope="col">2005</th>
<th scope="col">2004</th>
<th scope="col">2003</th>
</tr>
</thead>
<tbody>
<tr>
<td class="firstcol">Consumer Confidence</td>
<td>107.2</td>
<td>102.7</td>
<td>4.1%</td>
<td>100.3</td>
<td>96.1</td>
<td>79.8</td>
</tr>
</tbody>
</table>
</body>
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The Conference Board's Index of Consumer Confidence jumped 4.4% during March to 107.2, the highest level in nearly four years. The jump compared to Consensus expectations for stability at 102.0 and the m/m stability in the University [...]

Consumer Confidence Up Sharply

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

Resilient US economy is pushing up longer-term inflation expectations and interest rates

Positive US economic data surprises leading to upward adjustment of interest rate expectations

Recent aggressive policy easing in China has given a massive boost to equity prices

FOMC expects much more easing now than in June

US is clear world leader in business capital spending on artificial intelligence

Blue Chip forecasters expect US to lead aggressive policy rate cuts over coming year—apart from Japan

Ratio of job openings to the number unemployed in the US now below pre-pandemic level

U.S. layoffs not showing as much cooling in labor markets as unemployment rate

While goods prices have moderated, service price inflation remains elevated and sticky

Since Jan 2023, BCEI US outlook has improved, worsened for Japan and the euro area

Persistent negative US economic surprises leading to big rate-cut expectations

Germany is Euro area weakling

Flash PMIs show good start to Q3 in US; loss of momentum in the euro area

Chinese economy on downtrend could threaten global economy

Working age population labor force participation near all-time high as retirements increase

Blue Chip forecasters look for widespread policy rate cuts just ahead

Flash June PMIs point to a widespread slowdown apart from the US

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The Consumer Price Index increased 0.3% during November, up from four consecutive months of 0.2% gain. Expectations had been for a 0.2% rise in the Action Economics Forecast Survey. The y/y increase picked up to 2.7% from 2.6% in October and was the quickest rise in four months. The three-month increase rose to 3.0% (AR) from 2.5% but remained below the 4.6% high in April of this year. Prices excluding food & energy rose an expected 0.3% for the fourth consecutive month. Core consumer prices increased 3.7% (AR) during the last three months, up from 1.6% in July, and 3.3% y/y. Food prices rose 0.4% last month (2.4% y/y) after a 0.2% gain while energy prices rose 0.2% (-3.2% y/y) after holding steady in October.

The CPI less food, energy and shelter, another measure of core pricing power, rose 0.3% after a 0.2% gain. The 2.2% y/y rise was increased from a July low of 1.7% but remained below the 7.6% y/y peak in February 2022. It compared to a low of 0.3% y/y in May 2020.

Services costs less energy rose a steady 0.3% in November (4.6% y/y). Shelter costs rose 0.3% following a 0.4% rise in October. Its 4.7% y/y rise compares to an 8.2% peak in March 2023. Owners’ equivalent rent of primary residences increased 0.2% (4.9% y/y), following a 0.4% rise and was the weakest increase since April 2021. Rents of primary residences rose a similarly depressed 0.2% (4.4% y/y) after two consecutive months of 0.3% rise, but the cost of lodging away from home surged 3.2% (3.7% y/y) following a 0.4% October gain. Transportation service prices held steady last month (+7.1% y/y) after rising 0.4% in October, as public transportation prices also were unchanged (2.9% y/y) after a 2.4% October surge. Medical care service costs rose 0.4% (3.7% y/y) the same as in October. Education & communication prices eased 0.2% (+1.8% y/y) for the second straight month. Recreation services prices rose 0.7% (3.5% y/y), the same as in October.

During November, the CPI for goods less food & energy increased 0.3% (-0.6% y/y) after holding steady in October. Home furnishings prices rose 0.7% (-1.0% y/y), as appliance costs also rose 0.7% (-1.0% y/y).  Apparel costs rose 0.2% (1.1% y/y) after a 1.5% decline. Education & communication product costs fell 1.1% (-5.4% y/y) the same as in October while medical care product prices declined 0.1% (NSA, +0.4% y/y) in November. Prices for recreation products weakened 0.5% (-1.5% y/y), the fourth decline in five months. Transportation product prices rose 0.9% (-1.4% y/y) after improving 0.8%. New vehicle prices rose 0.6% (-0.7% y/y) after holding steady while used car & truck prices strengthened 2.0% (-3.4% y/y) after a 2.7% rise.

Food prices rose 0.4% (2.4% y/y) in November following a 0.2% October increase. Egg prices rebounded 8.2% (37.5% y/y) after a 6.4% decline. Meat, poultry & fish prices rebounded 1.1% (1.5% y/y) after falling 0.8% while cereal & bakery product prices weakened 1.1% (-0.5% y/y) after a 1.0% rise. Fruit & vegetable prices rose 0.2% (1.1	% y/y) after increasing 0.4%, while dairy prices eased 0.1% (+1.2% y/y) after rising 1.0% in October. Nonalcoholic beverage prices rose 1.5% (2.8% y/y) after a 0.4% October rise.

Energy prices rose 0.2% (-3.2% y/y) in November after holding steady in October. Gasoline prices rose 0.6	% (-8.1% y/y) after three straight monthly declines. Amongst other energy products, fuel oil & propane prices rose 0.4% (-10.7% y/y) after declining 2.2%. Electricity prices eased 0.4% (3.1% y/y) after a 1.2% gain, while natural gas prices jumped 1.0% (1.8% y/y) following a 0.3% October gain.

The Consumer Price figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

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- Food prices pick up.
- Services price gains remain steady.
- Core goods prices pick up.

U.S. CPI Picks Up Modestly in November; Core Prices Rise Steadily

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The U.S. Treasury Department reported a U.S. government budget deficit of $624.2 billion budget deficit for the first two months of FY 2025 after a $380.6 billion deficit for the first two months of FY’24. For November alone, the government ran a budget deficit of $366.8 billion, which compared to a deficit of $314.0 billion twelve months earlier. The Action Economics Forecast Survey expected a $356.5 billion deficit in November.

Overall revenues this fiscal year so far declined 7.3% y/y as individual income tax receipts fell 11.6% y/y. The level of corporate tax receipts nearly halved y/y. Social insurance revenues increased 7.4% y/y and excise taxes increased 34.0% y/y in FY’25. Customs duties rose 6.1% y/y in the first two months of FY’15.

Federal government outlays increased 18.3% y/y in early FY’25 after a 16.7% rise early in FY’24. Defense spending rose 13.7% y/y, as it did early in FY’24. Social Security outlays rose 6.9% y/y after rising 12.0% y/y in FY’24. Interest payments rose 8.0% y/y in FY’25 after a 63.7% rise a year earlier. Health program spending rose 12.0% y/y after holding steady early in FY’24 while Medicare payments doubled y/y. Income security outlays rose 31.8% y/y compared to a 15.1% y/y decline in the first two months of FY’24.

Haver's data on Federal Government receipts & outlays are contained in **USECON**. The expectations figure is in the **AS1REPNA** database.


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- Personal income tax receipts weaken.
- Corporate tax payments roughly halve y/y.
- Social Security spending fuels outlay growth.

U.S. Government Budget Deficit Deepens So Far in FY 2025

Kathleen Stephansen, CBE

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Mortgage applications in the week ended December 6 increased 5.4% (15.9% y/y) after rising 2.8% (18.1% y/y) in the week ended November 29. Applications for loans to purchase a house dropped 4.1% (+3.5% y/y) in the December 6 week, after a rise of 5.6% (11.8% y/y) in the November 29 week, while applications to refinance a loan surged 27.2% (42.2% y/y) in the latest week after declining 0.6% (+33.5% y/y) the week before. These data are from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey and the amounts quoted here are seasonally adjusted.

The effective interest rate on a 30-year fixed rate loan was 6.86% in the week ended December 6, down slightly from 6.89% in the November 29 week. The rate on a 5-year ARM dropped 50bps to 5.96% in the latest week from 6.46% in the November 29 week, still higher than 5.84% in mid-September. The rate on a 30-year jumbo loan was 6.94% in the week ended December 6, down slightly from 6.96% in the November 29 week, but slightly higher than 6.90% in mid-October.

The share of applications to refinance an existing mortgage was 46.8% in the December 6 week, sharply higher than the 38.7% share in the November 29 week. The largest share in recent months was 55.7% the week of September 20. The share of applications for ARMs was 5.3% in the latest week, down from 6.0% in the November 29 week. The last time the share was 5.3% was in the week ended February 25, 2022.

The average loan size in the December 6 week was $368,200, down 2.5% from $377,600 in the November 29 week, and up 3.6% from a year ago. The average size of an application for a loan to purchase a house was $416,200 in December 6 week, down from $431,900 in the week before, while the average size of an application to refinance an existing loan increased to $313,600 in the latest week from $291,500 in the November 29 week.

The Mortgage Bankers Association Survey covers 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver’s **SURVEYS** database.

- Applications to purchase a house drop, while applications to refinance surge.
- Slight decrease in rates on 30-year fixed-rate loans.
- Average loan size decreases modestly.

U.S. Mortgage Applications Rise in the December 6 Week

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U.S. nonfarm business productivity (output per hour) increased an unrevised 2.2% (SAAR) during Q3’24 after a 2.1% rise in Q2 and a 0.7% Q1 gain. The figure matched expectations in the Action Economics Survey. The 2.0% y/y increase remained below its 2.7% gain in 2023 (Q4/Q4) but was improved from a 1.4% decline in 2022. It also was greatly improved versus the 1.2% average between 2009 and 2019. Nonfarm business output increased 3.5% (2.8% y/y) after a 3.0% gain, revised from 3.5%, while hours-worked rose 1.2% (0.7% y/y) after increasing 0.9%.

Compensation growth slowed to 3.1% (4.3% y/y), revised from 4.2%, after a slightly revised 4.8% gain. As a result, unit labor costs grew 0.8% (2.2% y/y) last quarter, revised from 1.9% after a 1.1% decline, revised from a 2.4% increase. The Action Economics survey expected unit labor costs to rise 1.6% last quarter.

In the manufacturing sector, productivity in Q3 improved 0.9% (0.6% (y/y), revised from 1.0%, after rising a minimally changed 0.2% in Q2 and falling 0.7% in Q1. Compensation grew 2.6% (2.4% y/y), revised from 6.4%, following a 5.6% decline in Q2, revised from a 6.2% rise. Unit labor costs rose 1.7% (1.8% y/y), revised from 5.3%, after a 5.8% fall, revised from a 5.8% increase.

The productivity and labor cost data are available in Haver’s **USECON** database. The Action Economics expectations figures are in the **AS1REPNA** database.

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- Annual increase remains below last year’s gain.
- Compensation growth dips.
- Increase in unit labor costs slows.

U.S. Productivity Growth Is Steady & Unrevised in Q3’24

Winnie Tapasanun

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The NFIB Small Business Optimism Index rose to 101.7 in November, the seventh m/m rise in eight months and the highest level since June 2021, following a 2.2-point increase to 93.7 in October, according to the November 2024 Small Business Economic Trends survey conducted by the National Federation of Independent Business. This was the first time in 35 months that the index was above the 50-year average of 98. The index was also up from its recent low of 88.5 in March 2024, 90.6 in November 2023, and a low of 89.0 in April 2023; nevertheless, having remained below a high of 102.5 in June 2021. Nine of the 10 index components rose, none fell, and one was unchanged. The NFIB Small Business Uncertainty Index fell to 98 in November, the lowest level since August, from a record-high 110 in October; however, it was well above its recent low of 65 in November 2023 and a low of 55 in June 2022.

The outlook for business conditions in the next six months turned positive in the latest survey. The net balance of respondents expecting the economy to improve jumped to 36% in November, the sixth m/m rise in seven months and the highest level since June 2020, after a seven-point increase to -5% in October; it was significantly above a record low of -61% in June 2022. Expected real sales gained to a net 14% in November following a five-point rise to -4% in October, posting the highest level since February 2020. The latest reading was up from a low of -21% in May 2023 and a low of -29% in July 2022. A net -13% of respondents reported higher nominal sales in the past three months, up from -20% reported in October and registering the highest reading since June. The latest reading, however, was down from the most recent positive reading of 1% in May 2022 and a peak of 9% in June 2021.

Plans to make capital outlays rose to 28% in November from 22% in October, up from a low of 19% in September and a low of 19% in April 2023. The November number posted the highest reading since January 2022; nevertheless, having remained below a high of 31% in October 2021. Plans to expand the business advanced to 14% in November following a two-point increase to 6% in October; the latest figure, up from a low of 2% in March 2023, registered the best reading since a high of 15% in June 2021. Meanwhile, expected credit conditions edged up to -5% in November after a two-point increase to -6% in October; the latest number was slightly above its recent high of -6% in February 2024 but below a high of -4% in May 2022 and a high of -3% in November 2021.

On the labor front, labor markets remained relatively tight. Forty-eight percent of respondents reported that qualified workers to fill job openings were hard to find in November, up from 46% in October. These numbers were below a high of 57% in September 2023, a high of 61% in May 2022, and a peak of 62% in September 2021. A net 18% planned to increase employment in November, up from 15% in October and 15% in September, but it was down from a high of 26% in May 2022 and a peak of 32% in August 2021. Notably, 36% reported positions not able to be filled in November, up from 35% in October and registering the highest since August. These figures remained below a high of 51% in May 2022.

Overall earnings trends continued to improve in November while having remained in negative territory since December 2019. The figure increased to -26% in November, still a poor reading, following a one-point uptick to -33% in October; these numbers were below a high of -18% in March 2023.

On the pricing front, inflation pressures, while trending down, remained at an inflationary level. The net percent raising their average selling prices rose to 24% in November after a one-point decline to 21% in October; these numbers, however, were slightly down from 25% in November 2023 and well below a high of 66% in March 2022. The percentage planning to raise prices rose to 28% in November following a one-point increase to 26% in October; these figures were below 34% in November 2023 and a high of 52% in March 2022.

Wage inflation was still relatively high in the November survey. A net 32% of respondents raised compensation during the last three months, slightly up from 31% reported in the October survey. However, it was down from a high of 46% in February 2023 and a peak of 50% in January 2022. A net 28% of firms planned to raise worker compensation in the next three months, up from 23% reported in October and registering the highest reading since December 2023; nevertheless, having remained below a high of 30% in November 2023 and a high of 32% in October 2022.

Inflation continued to be an issue facing small businesses, as reported by 20% of NFIB members in November as the single most important problem. Registering the lowest reading since January 2024, the November figure was down from 23% in October and a peak of 37% in July 2022. The quality of labor was the second important concern with 19% in November, slightly down from 20% in October. Other concerns (in November vs. October) included taxes (14% vs. 16%), the cost of labor (11% vs 8%), and government requirements (8% vs. 8%).

According to the Small Business Administration, there are 33 million small businesses in the United States, which employ 62 million workers. The NFIB surveys anywhere from 500 to 2000 respondents each month and the typical firm employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver’s **SURVEYS** database.

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- November NFIB Small Business Optimism Index up 8.0 pts. to 101.7.
- Uncertainty Index down 12 pts. to a three-month-low 98.
- Expectations for economy up 41 pts. to 36%, the highest since June ’20.
- Expected real sales up 18 pts. to 14%, the highest since February ’20.
- Inflation (20%) remains top business problem, followed by Quality of Labor (19%); both slightly down from October.

Economy in Brief: March 2006

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US 4Q GDP Little Revised at 1.7%, Profits Surged

Retail Sales Lag Shops' Plans in March, New CBI Distributive Trades Survey Shows

Mortgage Applications Recover Some

Mortgage Applications Recover Some

Business Confidence Improves in Germany and Italy; Is Unchanged in France

FOMC Increased Fed Funds Rate to 4.75%

Chain Store Sales Slide, Gasoline Prices Up

Consumer Confidence Up Sharply